When you run a company, there are many tweaks, trims and tune-ups you can perform to increase profits.
But none has a greater effect than improving your pricing strategy. Absolutely none.
It’s the area many business gurus identify as the most commonly untapped profit stream for businesses – because there’s absolutely no other area where small changes can have such a dramatic effect. In fact, a McKinsey study of the Global 1200 found that just a 1% rise in prices (if demand stays the same) could increase profits by an average of 8%.
So, if you’re not employing any of the strategies described below, we guarantee you’re leaving good money on the table.
You may, of course, feel you’ve got the balance right; that you’re charging as much as your customers (and the market) will tolerate. But how scientific is that feeling?
Because the simple truth is that customers’ minds don’t work in the way that your instinct tells you they do.
Multiple studies have shown that Price, in isolation, is a relatively meaningless figure. The human mind can’t process absolute figures – we’re conditioned to focus on differences, contrasts and changes.
And while a small number of your customers may indeed buy on price, when you take into account the Pareto Principle – 80% of your sales come from 20% of your customers – are these tyre-kickers really worth your effort? They can’t afford you, they don’t value you and they’re often the hardest to get payments from.
Wouldn’t it be better to: a) work on attracting those who are prepared to pay for what they want? And b) use price queries as an opportunity to explain the value you offer?
Because if your customers baulk at a little price increase, there can only be three reasons why:
- They can’t afford you
- There isn’t enough value in your offering
- You haven’t communicated the value
So, in the 6th mind-blowing session of Rise, we’ll tell you how to address all this and maximise the value from your most valuable customers. We’ll cover:
- How to gauge the sensitivity of your customers to price change – and find your optimal pricing position in the market
- The pros and cons of the 3 most effective pricing methodologies
- How to arrive at your optimum price for each customer
- The 7-step strategy for effective pricing, including:
- how to analyse your total reachable market,
- how to create added value differentiators so that your customers will willingly pay more, and
- how to link your pricing to value
So, what are the alternatives if you want to double your profits?
Of course, you could cut costs – but you’d have to make some pretty deep cuts to make twice the profit; possibly as much as 20%! Including wage cuts. And this may damage company morale as well as your ability to deliver.
Then again, you could always ramp up your sales. Although, to double annual profit, you’d need to raise turnover by a third. Which means bringing in a third more customers, or selling 30% more to existing customers – no mean feat!
Which leaves raising your prices as your only effective strategy.
So why not take advantage of our tried-and-tested strategies? Proven in the white heat of competition and used by the most successful companies the world over.
It’s an advantage you wouldn’t want your competitors to have – so why not grab it with both hands?
- Book your free Rise session for ‘Growth through pricing’. Visit our Rise webpage to see our upcoming events and learn more about our Rise business growth programme.
- Arrange a bespoke Rise session for your team, focusing on developing your pricing strategy at a venue convenient for you. Contact our business advisors to discuss further.
- Request a project to develop your pricing strategy. Arrange a discussion with our business advisors.